ch 2 - demand and consumer choice

individual demand

a graph that plots the quantity of item that an individual plans to purchase at each price

what does demand look like on a graph?

slopes down

diminishing marginal benefit

each additional item yields a smaller benefit

market demand curve

plots the total quantity of an item demanded by the entire market at each price

four step process

1. survey

2. for each price, add up total quantity

3. scale up

4. plot

movement along the demand curve

means a change in quantity demanded

normal good

higher income causes an increase in demand (iphone, name brand products)

inferior good

higher income causes a decrease in demand (generic brand)

complementary goods

go well together

substitute goods

replace each other

individual

one person

demand

buying decisions

curve

graph

shift in demand curve

increase - right

decrease - left

factors that shift demand curve

1. income

2. preferences

3. price of related goods

4. expectations

5. congestion/network effects

6. type/number of buyers